We explain how external auditors and assurance practitioners can integrate nature-related considerations into their work.
Nature plays a crucial role in business operations, and accountants are increasingly expected to consider nature-related risks and opportunities in financial and sustainability reporting. The global shift towards mandatory sustainability reporting means accountants must ensure transparency and reliability in both financial statements and non-financial disclosures.
The role of external auditors and assurance practitioners in nature-related accounting
External auditors and assurance practitioners provide credibility to corporate reports by independently verifying the accuracy of financial and sustainability disclosures. Here is a high-level overview of how nature connects with the typical responsibilities of external auditor or assurance practitioners.
- Establish suitable criteria and expertise: Understand interactions with and assess disclosures against nature-related frameworks.
- Perform risk assessment: Understand where nature-related issues gave potential to create substantial risk of misstatement.
- Evaluate and assess information and underlying processes and controls: Have sufficient familiarity with nature-related data types and data holders to gather evidence.
- Reporting their assurance conclusions and opinions: Have knowledge to determine whether nature-related risks have been addresses sufficiently.
The importance of nature in financial and sustainability assurance
For financial auditors, it is essential to consider whether nature-related issues are material to the financial statements. If they are, the financial statements must appropriately reflect them in accordance with the relevant financial reporting framework. Auditors need to gain the knowledge for how these issues relate to their responsibilities under professional standards and applicable law and regulation.
Sustainability assurance involves additional challenges. Practitioners must understand the standards against which an organisation reports, the intended users and purpose of the report, and whether the systems, processes, and controls provide a reliable basis for the nature-related information. It may be necessary to involve a subject matter expert to ensure competence and capability in the assurance engagement.
While financial audits and sustainability assurance may be separate engagements, they can be performed by the same firm. This can offer advantages such as economies of scale, improved coordination, enhanced reliability and comparability of results, and deeper insights due to the firm’s familiarity with the client’s operations. Coordination between the financial statement auditor and sustainability assurance practitioner is important to ensure alignment and consideration of interconnections.
Sustainability assurance engagements cover a wide range of activities, from verifying individual metrics and disclosures to entire sustainability reports. Assurance practitioners will need a deep understanding of nature-related issues, more so than those focusing solely on financial statements. However, both will need a baseline knowledge to ensure trust in the disclosures by users.
Collaboration with a client’s internal audit team is also crucial. Internal auditors help evaluate the effectiveness of governance, risk management, and control processes. Early engagement can enhance the assurance process by coordinating efforts, avoiding duplication of work, and sharing information.
As auditors, you may have already started incorporating sustainability aspects into your work. For those at the beginning of this journey, five key actions can help you get started. Depending on the maturity of your organisation's approach to nature-related issues, you may choose to focus on all five or just a few. The important step is to begin integrating these considerations into your audit and assurance practices.
Five key actions for external auditors and assurance practitioners to get started
1. Understand nature-related issues in your client’s organisation
With the increasing prominence of nature-related issues in business, auditors and assurance practitioners must develop a clear understanding of how environmental factors impact financial and sustainability reporting. Accountants are expected to assess an organisation’s relationship with nature as part of their risk evaluation and assurance engagements. This requires familiarity with key nature-related concepts, effective communication with clients, and collaboration with internal teams and external experts.
Financial audit considerations
For financial auditors, understanding nature-related risks is critical when evaluating financial statements and identifying potential areas of material misstatement. Organisations may already have conducted a nature-related materiality assessment, which auditors should review to understand key environmental risks. Where such an assessment does not exist, auditors must encourage its completion while maintaining independence.
The Taskforce on Nature-related Financial Disclosures (TNFD) LEAP guidance provides a structured approach for assessing nature-related risks, harmonised with reporting frameworks such as the EU’s Corporate Sustainability Reporting Directive (CSRD), IFRS, and the Global Reporting Initiative (GRI). Auditors should incorporate this into their assessments, ensuring that nature-related issues are properly accounted for in financial statements.
Sustainability assurance considerations
For assurance practitioners, evaluating nature-related disclosures requires identifying areas most exposed to environmental risks. This includes high-risk transactions, key operational sites, and specific products. Practitioners must engage with relevant teams - including internal audit, sustainability, procurement, and sales - to ensure disclosures are accurate, complete, and verifiable.
To provide effective assurance, practitioners may need to consult external nature-related experts. The TNFD LEAP guidance is a useful starting point, but additional expertise will be required for in-depth assurance engagements.
Key takeaways for auditors and assurance practitioners:
- Familiarise yourself with nature-related risks – Understand how environmental issues impact financial reporting and assurance processes.
- Review existing materiality assessments – Use these to assess risks and ensure that material nature-related issues are included in financial statements.
- Follow reporting frameworks – Align assessments with CSRD, IFRS, GRI, and TNFD guidance.
- Engage with internal and external experts – Work with internal teams and seek external expertise when necessary.
- Ensure assurance is meaningful – Disclosures should be relevant, reliable, and support informed decision-making.
By integrating nature-related issues into financial and sustainability assurance, auditors can help businesses improve transparency, mitigate risks, and enhance the credibility of corporate reporting.
2. Learn about nature-related reporting frameworks
As businesses increasingly face scrutiny on sustainability and environmental impact, auditors and assurance practitioners must familiarise themselves with nature-related reporting frameworks. These frameworks ensure consistency between narrative reporting, financial statements, internal reporting, risk management, governance, and control processes. Accountants must understand which frameworks apply to their clients to provide accurate and meaningful assessments.
Financial audit considerations
Auditors must assess whether nature-related information is necessary to present a true and fair view in financial statements. This is particularly crucial for businesses operating in sectors or regions heavily exposed to environmental risks, such as agriculture, forestry, and manufacturing.
Since disclosure requirements vary by jurisdiction, auditors must review the entire suite of annual reports—including sustainability or transition reports—to identify any inconsistencies with financial statements. Familiarity with key reporting frameworks is essential to assess whether environmental risks and opportunities are properly integrated into financial disclosures.
Sustainability assurance considerations
For sustainability assurance, practitioners must verify whether the report preparer has applied suitable criteria for assessing nature-related disclosures. Organisations may choose from various reporting standards or even develop their own criteria, making consistency a challenge.
Until sustainability frameworks become more standardised, assurance practitioners must exercise professional scepticism and judgement when evaluating the relevance, completeness, and neutrality of disclosures. This is particularly important when organisations do not follow established frameworks such as the following.
- TNFD – A framework for assessing and reporting on nature-related risks and dependencies.
- European Sustainability Reporting Standards (ESRS) – Mandatory for companies under the EU’s Corporate Sustainability Reporting Directive (CSRD).
- GRI – A widely used voluntary framework for sustainability reporting.
- IFRS S1 – Developed by the International Sustainability Standards Board (ISSB) to ensure financial relevance in sustainability reporting.
Key actions for auditors and assurance practitioners:
- Identify relevant frameworks – Understand the applicable nature-related reporting standards for each client.
- Assess true and fair presentation – Ensure that nature-related disclosures align with financial statements.
- Exercise professional judgement – Evaluate the suitability of reporting criteria, especially where custom frameworks are used.
- Review assurance standards – Be aware of applicable assurance standards to maintain consistency in engagements.
- Adapt to a changing landscape – Expect evolving regulations and greater harmonisation of reporting frameworks over time.
By integrating nature-related reporting frameworks into audit and assurance work, accountants can enhance transparency and improve the reliability of corporate sustainability disclosures.
3. Engage nature-related experts in your assurance engagement when necessary
Accountants may need to involve environmental specialists in assurance engagements to properly assess nature-related impacts. External experts can provide insights into areas such as biodiversity loss, water scarcity, and carbon emissions. However, the responsibility for assurance conclusions remains with the accountant.
4. Consider nature-related risks in financial statements
As nature-related risks and opportunities increasingly impact financial reporting, auditors and assurance practitioners must ensure these aspects are properly considered in financial statements. While IFRS Accounting Standards do not explicitly cover nature-related issues, they provide guidance on material disclosures. If nature-related matters are significant to an organisation’s financial position, they must be disclosed in line with financial reporting frameworks.
Financial audit considerations
Auditors need to assess whether financial statements adequately reflect material nature-related risks and opportunities. This aligns with the evolving focus on integrating financial and non-financial reporting. The IASB’s Exposure Draft on Climate-Related and Other Uncertainties highlights how organisations can apply IFRS principles to report environmental risks, including drought-related credit risks and site restoration obligations.
To meet this responsibility, auditors should do the following.
- Review internal audit findings to identify nature-related risks that may need external validation.
- Understand relevant accounting standards, particularly those addressing financial uncertainty.
- Obtain appropriate audit evidence, such as transaction samples, site visits, document reviews, and automated data testing.
- Assess the reliability of nature-related data, which may be more complex, forward-looking, and subject to measurement challenges.
Sustainability assurance considerations
Assurance practitioners must apply professional scepticism to nature-related disclosures, ensuring they are relevant, complete, neutral, and understandable. This requires a solid understanding of accounting standards and how nature-related risks may affect disclosure decisions.
Key challenges include the following.
- Bias in disclosures – Companies may omit material nature-related risks from narrative reports due to potential financial impact.
- Complexity of qualitative data – Unlike financial data, nature-related information is often harder to measure and verify, requiring expert judgement to determine materiality.
- Risk-based approach – Identifying and addressing risks of material misstatement in sustainability reports is essential for assurance engagements.
Key actions for auditors and assurance practitioners
- Familiarise with nature-related risks – Stay updated on how environmental issues impact financial statements.
- Enhance professional scepticism – Challenge the completeness and reliability of nature-related disclosures.
- Strengthen knowledge of relevant standards – Understand how IFRS frameworks apply to environmental risks.
- Develop expertise in nature-related data – Recognise the inherent uncertainties and biases in environmental reporting.
- Adapt audit and assurance procedures – Tailor evidence-gathering techniques to nature-related financial risks.
As regulatory expectations evolve, accountancy professionals must integrate nature-related risks into their audit and assurance processes to ensure transparency and compliance with financial reporting standards.
5. Familiarise yourself with the challenges of nature-related data
Nature-related risks and opportunities are becoming an increasingly important aspect of both financial statement audits and sustainability assurance engagements. Auditors and assurance practitioners must be prepared to assess the materiality of nature-related disclosures, which often involve qualitative data that can be complex, uncertain, and forward-looking.
Challenges of nature-related data
One of the main challenges with nature-related data is its qualitative nature. Unlike traditional financial data, which is numeric and well-documented, nature-related disclosures often involve subjective assessments, estimations, and external sources. This introduces potential risks of bias, error, or inconsistency. Given the growing importance of sustainability and environmental factors in financial reporting, auditors need to develop a strong understanding of how these risks impact financial statements and business performance.
Financial audits considerations
For financial auditors, identifying and evaluating nature-related risks requires a structured, risk-based approach. If nature-related issues are deemed significant, auditors may need to gather supporting evidence using various techniques, including the following.
- Sampling transactions to assess how nature-related risks are recorded.
- Site visits and interviews to engage with individuals responsible for environmental and sustainability reporting.
- Document reviews and recalculations to verify the accuracy of sustainability metrics.
- Automated data testing to analyse how nature-related risks are recorded in company systems.
Because nature-related information is often less precise and more uncertain than financial data, auditors must exercise professional scepticism and judgement in evaluating its reliability. Determining what nature-related information is material to financial statements and should be disclosed is a critical but challenging step.
Sustainability assurance considerations
For assurance practitioners reviewing sustainability-related disclosures, the challenges are even greater than in financial audits. Unlike financial data, nature-related data may originate from external sources or individuals unfamiliar with assurance processes. This means:
- Data may lack the robustness typically expected in financial reporting;
- Qualitative nature-related disclosures may be harder to verify through traditional audit procedures; and
- Assurance practitioners must determine what constitutes sufficient and appropriate evidence to support their conclusions.
Despite these challenges, nature-related disclosures can offer valuable insights to stakeholders, provided they are assessed, disclosed, and communicated transparently. Assurance practitioners must develop expertise in nature-related data, understanding its sources, limitations, and implications for business risks and opportunities.
As nature-related financial and sustainability reporting gains prominence, auditors and assurance practitioners must adapt by developing deeper knowledge and critical evaluation skills. They must remain diligent, sceptical, and well-informed to ensure that nature-related disclosures provide reliable and meaningful information to stakeholders.